Accountancy

Correct answer: C

I is correct: Operating profit → Profit from operations before financing and tax effects under the stated presentation. It focuses on operating performance. II is incorrect: Factory building used over many years → Non-current tangible asset. It supports production rather than being held for ordinary sale.

Correct answer: B

It reduces receivables to an estimated recoverable amount.

Correct answer: C

I is incorrect: Trade receivable expected to be collected within the operating cycle → Current asset. It is expected to convert into cash in the ordinary cycle. II is correct: Amount owed to suppliers for purchases → Trade payable. It is a liability to suppliers.

Correct answer: A

The expense has been incurred but remains unpaid.

Correct answer: C

I is correct: Bank loan due after several years → Non-current liability. The repayment falls outside the short-term classification assumed here. II is correct: Accumulated depreciation → Contra-asset. It reduces the carrying amount of the related depreciable asset.

Correct answer: B

It distinguishes cash flows from accrual profit.

Correct answer: A

I is incorrect: Amount owed to suppliers for purchases → Trade payable. It is a liability to suppliers. II is correct: Allowance for doubtful debts → Contra-receivable estimate. It reduces receivables to an estimated recoverable amount.

Correct answer: C

I is incorrect: Factory building used over many years → Non-current tangible asset. It supports production rather than being held for ordinary sale. II is incorrect: Purchased patent used by the business → Intangible asset. It is an identifiable non-physical right.

Correct answer: A

It is expected to convert into cash in the ordinary cycle.

Correct answer: D

I is incorrect: Bank loan due after several years → Non-current liability. The repayment falls outside the short-term classification assumed here. II is incorrect: Prepaid expense for the coming month → Current asset. The business has a short-term future service benefit.

Correct answer: A

I is incorrect: Inventory held for sale in the operating cycle → Current asset. It is part of normal trading operations. II is correct: Owner's residual interest after liabilities → Equity. Equity equals assets minus liabilities.

Correct answer: C

Operating and financing expenses are deducted later.

Correct answer: D

I is correct: Purchased patent used by the business → Intangible asset. It is an identifiable non-physical right. II is incorrect: Outstanding electricity expense → Accrued liability. The expense has been incurred but remains unpaid.

Correct answer: B

It supports production rather than being held for ordinary sale.

Correct answer: D

I is correct: Operating profit → Profit from operations before financing and tax effects under the stated presentation. It focuses on operating performance. II is correct: Bank loan due after several years → Non-current liability. The repayment falls outside the short-term classification assumed here.

Correct answer: A

I is incorrect: Gross profit → Sales revenue minus cost of goods sold. Operating and financing expenses are deducted later. II is correct: Allowance for doubtful debts → Contra-receivable estimate. It reduces receivables to an estimated recoverable amount.

Correct answer: A

It reduces the carrying amount of the related depreciable asset.

Correct answer: B

I is correct: Outstanding electricity expense → Accrued liability. The expense has been incurred but remains unpaid. II is incorrect: Inventory held for sale in the operating cycle → Current asset. It is part of normal trading operations.

Correct answer: A

They are not the same as a separate cash fund.

Correct answer: B

I is incorrect: Gross profit → Sales revenue minus cost of goods sold. Operating and financing expenses are deducted later. II is incorrect: Amount owed to suppliers for purchases → Trade payable. It is a liability to suppliers.

Correct answer: C

It focuses on operating performance.

Correct answer: A

I is incorrect: Purchased patent used by the business → Intangible asset. It is an identifiable non-physical right. II is correct: Owner's residual interest after liabilities → Equity. Equity equals assets minus liabilities.

Correct answer: A

I is correct: Inventory write-down → Reduction when carrying cost exceeds recoverable inventory value under the rule. The loss is recognised rather than retaining an overstated asset. II is incorrect: Useful life → Expected period or units of service to the entity. It may be shorter than the asset's physical life.

Correct answer: D

It does not by itself create a separately recognisable long-term improvement.

Correct answer: C

I is incorrect: Impairment → Reduction when an asset's carrying amount is not recoverable under the applicable test. It is distinct from routine systematic depreciation. II is correct: Perpetual inventory system → Inventory records updated continuously for movements. It supports ongoing quantity and cost information.